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Everything's going to the cloud, but only the hopelessly naïve would believe it's a stairway to heaven. Given the current economic situation, there's lots of incentive to rent only what you need, rather than buy enough to handle the heaviest workload. There are also plenty of reasons to reduce the general level of expertise needed to keep your systems working. But it's by no means certain that the cloud can deliver in either department -- and perform in a secure, reliable way.

Can your company save money by paying Microsoft or Google to take on what you'd otherwise attempt in-house? What kinds of problems can you expect? What benefits? Will either of these solutions make sense for you, or is the grass always greener on the cloudy side?

Clash of the cloudsBefore we attempt to answer those questions, one thing must be stated flatly: Office 365 and Google Apps are vastly different products. Office 365 is meant to be used with a locally installed version of Office (preferably Office 2010), whereas Google Apps lives 100 percent in the browser. To use a hackneyed metaphor, we're talking apples and oranges. With so many feature variables between the two products, blanket pronouncements don't make a lot of sense.

Nonetheless, with the production release of Office 365, the cloud era of desktop productivity software officially kicks into high gear. Office 365 works with Microsoft's Web App versions of desktop Office applications -- Word, Excel, PowerPoint, and OneNote -- so theoretically, you can use it without a locally installed version of Office at all. But most people won't. The real Office 365 ploy is this: Sick of maintaining Exchange and SharePoint servers? No problem, pay Microsoft, and it will run those servers for you -- and throw in the fancy new Lync communications server.

Office 365 represents the first time Microsoft has bundled desktop software (Office 2010) with an online service into a single subscription-based offering. But if you have another source of licenses for Office (2010, 2007, or otherwise), or if you want to run just the Office Web Apps (not likely), you can get an Office 365 license without paying for Office.

Google Apps isn't a colossal, all-encompassing environment like Office 365 or its predecessor Microsoft BPOS (Business Productivity Online Standard Suite). It's intended to be small, light, and hit the high points. Google Apps includes Google Docs for word processing, spreadsheets, slide shows, forms, and data storage; Gmail and Calendar, which you've probably used before; a website-building utility called Sites; a spam filter called Postini; and a video-sharing app. When you pay for Google Apps, you pay for the programs that let you manage an unlimited number of email accounts on your domain, 25GB of space on each mail account, and for phone support of varying quality. All the rest of the Google bundle is free for everybody, all the time.

One feature missing from Google Apps will be a showstopper for many: You can't save locally unless you specifically, manually download data to your PC using Google Sync. So for practical purposes, if you're offline, you're out of luck. According to Google, this will change no later than the end of this summer, by which time Google Apps and the Chrome browser will gain support for the offline storage features of HTML5.

Overall, comparing Office 365 to Google Apps is like comparing the QE II to a sailboat. Both of them will get you over the water, but they do it in completely different ways -- especially on the server side. (To dig deep into the online versions of Exchange 2010, SharePoint 2010, and Lync 2010, see InfoWorld's Office 365 preview; little has changed since then.)

If you revel in the intricacies of Exchange Server 2010, you'll be happy to know that all of that power and complexity carries through to the Microsoft-hosted version, although there's a simplified interface sitting on top. There's also a peace-of-mind factor: Microsoft takes on the care and feeding of Exchange, SharePoint, and Lync -- including maintenance, security, backup, and uptime. For those of you in large organizations, Microsoft will let you split server duties on-premises and in the Microsoft cloud, an inviting prospect if your company has a handful of big centers, with small satellites spread out geographically.

Finally, a word about file compatibility -- which remains a sticking point for both Office Web Apps and Google Docs. Opening an existing Office document in either of these companies' online apps works reasonably well, but it's not unusual for Google Docs to garble heavily formatted Word documents. In general, Microsoft Web Apps do a better job displaying complex Word documents than Google Docs does.

Setup: The quick and the bloatedThe first setup hurdle to clear involves email. On the Google side, you have to migrate your current mail server over to Gmail. On the Office 365 side, you need to get Exchange hooked up and get the mail flowing through it, but there's much more on offer.

If you're looking at moving some of your company's functions into the cloud, and you aren't wedded to Exchange Server, spend some time with Google Apps. Taking Google Apps for a test drive is very easy. Start with the setup wizard. After you verify ownership of your domain name (generally by putting a specific file on your website), it only takes a few clicks to follow the wizard (see Figure 1), set up users, and get going.Figure 1: The setup wizard, integrated into the administrator’s control panel, makes it very easy to get started with Google Apps for Business.

The wizard has an interesting series of steps that show you how to test Gmail using a "real" email account -- say, the email address you're using right now -- without disrupting the current flow of mail. If you're using Outlook or some other email package, and you can tell your mail server to send duplicate copies of your inbound messages to a different server, that's all you need. In my case, I wanted to test with my regular email account, woody@askwoody.com, which I normally handle through Outlook. I followed the instructions in the Google Apps setup wizard and had my mail server send a copy of inbound emails to woody@askwoody.com.test-google-a.com. Bingo. Any mail sent to my email address appeared in both my regular Outlook inbox, and in my Google Apps Gmail test inbox. I could test with live data, without affecting the normal flow of email. Working in a similar fashion, you can gradually move people over to Gmail without upsetting their current email procedures, and both the "legacy" and new Gmail accounts will work in concert.

The Google Apps setup wizard is always one click away, using the admin control panel. It remembers your location in the setup sequence, allowing you to leave, then come back and pick up where you left off.

By contrast, setup in Office 365 isn't nearly as easy. Log in with an admin id, click on the Admin tab, and you're presented with a dozen options (see Figure 2).Figure 2: Office 365’s setup is complicated – but then, so is the package.

Part of the reason Google's approach seems streamlined by comparison is the old apples and oranges thing: There's simply so much more to set up in Office 365.

When you add new users in Office 365, they're immediately given email inboxes, a default Team Site, and instant messaging. But beyond that, you have to carve out your custom environment. Will you implement single sign-on, or require users to sign-on once locally, then again in the cloud? If so, there's a complex series of steps to get single sign-on working. Do you want Active Directory services to apply both locally and online? If so, you have to set up syncing Active Directory between your on-premises server and the Office 365 server. You have to switch domains over to the Office 365 server. Manage SharePoint permissions. Get Lync configured. And you need to push updates for Office 2010 or 2007 onto all of your users' machines, so they can connect with the Office 365 servers and services. That's just to get started.

If you're moving from Microsoft's BPOS to Office 365, the transition shouldn't be difficult. But if you have an on-premises Exchange Server(s), Office 365 setup is going to be a big job, particularly if your servers have been extensively customized. You can, however, selectively migrate email from your own Exchange Server to the Office 365 Exchange Server. Move one user or a small group of users at a time, and they won't even know it's happening. Look up Email Coexistence in the Administrator Introduction.

In my InfoWorld Test Center scores, I give Google Apps setup a 9 and Office 365's a 7, assuming you're moving from an environment without Exchange Server. If you're moving from Exchange Server, much depends on how much tweaking you've done to your server. If you're moving from BPOS, Office 365 should be a 9.

Features: Leviathan vs. lightweightComparing the features of Office 365 with those of Google Apps immediately returns us to the apples and oranges cliché. Feature supremacy all depends on what you intend to use and how you intend to use it. Office 365, combined with Office on the desktop, handles a universe of demands, from tricked-out email to professional presentations simulcast on meeting attendees' smartphones; from full team collaboration on a complex financial model to shared details about customers or suppliers to voice systems far more advanced than PBX.

Google Apps, on the other hand, gives you a hodgepodge of tools for administering your company's online email, storing and sharing files, sharing calendars, free long distance phone calls, team collaboration on documents, online forums, and much more. Google Apps delivers all of that at about one fifth the price of Office 365, assuming you already have (or don't need) Office on the desktop. The demands on technical personnel are much smaller with Google Apps, as well.

The online versions of all of the apps -- Office Web Apps and Google Docs -- don't even come close to the full desktop versions of Word, Excel, and PowerPoint. If your needs are very simple, online Word or Google Docs can whip up a memo or white paper, but if you need any sort of advanced formatting, forget it. As mentioned earlier, Microsoft's online Word does a better job of rendering graphics than Google Docs, but opening a complex document in any of the free apps, making changes, and then saving it can cause all sorts of problems. The online versions of Excel, both Microsoft and Google, have trouble with any sort of graphing. And presentations in Google's online app are a far cry from PowerPoint.

Most companies have a core of employees who need the features in Microsoft Office. Casual users may only need the online apps. You may be able to save quite a bit of money if you don't need Office on every desktop.

If you currently have Office 2007 or 2010 on all of your machines, and you aren't currently using Exchange, SharePoint, or Lync, Office 365 opens up all sorts of functionality. Renting Office 365 brings all of the features of Exchange, SharePoint and Lync -- basically the same features you could get by setting up your own servers -- but Microsoft handles the back end in the cloud. Some of the high points:

Outlook Web Access (see Figure 3), which gives you nearly all of the features of the desktop version of Outlook. The current OWA's now accessible from any modern Web browser, on a PC, Mac, tablet, or phone. You can work on the Web, and have everything synchronized back to your desktop. And vice versa.

Support for voice calls, which handles inbound calls a lot like email. If someone calls and leaves you a message, you get a text transcript of the first part of the message sent to your phone via SMS.

Calendars and contacts can be shared securely, and extended to other trusted companies. Office 365 handles full rights management (specifying read-only on certain documents, for example, using Rights Management Services), delivery status notifications, and the like.

SharePoint file sharing, which lets multiple people collaborate on a single document simultaneously, in a rich, multilingual environment. SharePoint also offers a top-notch HTML editor, wiki-style markup, and centralized document management and administration through Team Sites.

Lync offers VoIP phone calls, instant messaging, meeting support and videoconferencing, both stand-alone and embedded inside the various Office apps.

Figure 3: Outlook Web Access may be the single most compelling reason for Outlook shops to move to Exchange Server and Office 365.